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Nearly a third of Nasdaq 100 stocks are in a correction, but two names look like a buy

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Best stock picks when the Nasdaq faces a correction

The Nasdaq roared back from its two-day sell-off, but a handful of its biggest names are showing signs of strain.

Amazon, Netflix, eBay, Cisco and Starbucks are among those stocks in the Nasdaq 100 in or about to enter a correction — a drop of 10% or more from 52-week highs. Nearly one-third of the Nasdaq 100 is in a correction or worse.

Chad Morganlander, portfolio manager at Washington Crossing Advisors, is wary of large-cap growth tech stocks and sees opportunity in one value name.

"If there was one company that we would be buying and that we've owned for many years, that would be Cisco Systems. That one has a P-E multiple of 15 times and enterprise value to EBIT of roughly about 12 times," Morganlander said on CNBC's "Trading Nation" on Tuesday.

Cisco's less-than 15 times forward price-to-earnings ratio compares with the S&P 500's 18 times forward multiple.

"We believe that even with an embedded growth rate of 2% or 3% over the long run, you can get a favorable return. That also has a dividend yield of roughly about 2.9%," said Morganlander.

Cisco has come under pressure in the past week as the rest of the market sold off. Shares are down 2% since last Wednesday, a steeper decline than the S&P 500's 1% drop.

Craig Johnson, chief market technician at Piper Sandler, has a preference for a more growthy high-momentum stock.

"Take a look at the chart of Netflix," Johnson said during the same segment. "We chose it number one because they've already reported earnings, so if you're looking to de-risk some of your tech names, this will be one of them."

Netflix reported better-than-expected earnings and sales when it posted results last week — guidance came in weaker than consensus. The stock has risen 3% since that report.

"Second, the technical setup looks interesting — the shares are moving above their 50- and 200-day moving average. You're clearing support at $340. It looks like the stock has got about 10% or more upside back to that $385 level, and that's a name that we could be buying in here at this point," Johnson added.

Netflix closed Tuesday at $348.52 a share.

Disclosure: Washington Crossing Advisors holds Cisco.

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